Cathay General Bancorp (CATY)

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Cathay General Bancorp (CATY)

Q1 2013 Earnings Conference Call

April 16, 2013 18:00 ET


Monica Chen - Investor Relations

Dunson Cheng - Chairman, President and Chief Executive Officer

Heng Chen - Executive Vice President and Chief Financial Officer

Kim Bingham - Executive Vice President and Chief Credit Officer


Aaron Deer - Sandler O’Neill & Partners

Joe Morford - RBC Capital Markets

Brett Rabatin - Sterne Agee

Herman Chan - Wells Fargo Securities

Julianna Balicka - KBW

Gary Tenner - D.A. Davidson



Good afternoon, ladies and gentlemen, and welcome to Cathay General Bancorp’s First Quarter 2013 Earnings Conference Call. My name is Karess and I will be your coordinator for today. At this time, all participants are in listen-only mode. Following the prepared remarks, there will be a question-and-answer session. (Operator Instructions) Today’s call is being recorded and will be available for replay at

Now, I would like to turn the call over to Monica Chen, Investor Relations for Cathay General Bancorp.

Monica Chen

Thank you, Karess, and good afternoon. Here to discuss the financial results today are Mr. Dunson Cheng, our Chairman of the Board, President and Chief Executive Officer; Mr. Heng Chen, our Executive Vice President and Chief Financial Officer; and Mr. Kim Bingham, our Executive Vice President and Chief Credit Officer.

Before we begin, we wish to remind you that the speakers on this call may make forward-looking statements within the meaning of the applicable provisions of the Private Securities Litigation Reform Act of 1995 concerning future results and events, and these statements are subject to certain risks and uncertainties that could cause actual results to differ materially. These risks and uncertainties are further described in the company’s Annual Report on Form 10-K for the year ended December 31, 2012, at Item 1A in particular, and in other reports and filings with the Securities and Exchange Commission from time-to-time. As such, we caution you not to place undue reliance on such forward-looking statements, which speak only as of the date of this presentation. We undertake no obligation to update any forward-looking statements or to publicly announce any revision of any forward-looking statements to reflect future developments or events, except as required by law.

This afternoon, Cathay General Bancorp issued an earning release outlining its first quarter 2013 results. To obtain the copy, please visit our website at After comments by management today, we will open up this call for questions.

I will now turn the call over to our Chairman of the Board, President and CEO, Mr. Dunson Cheng.

Dunson Cheng

Thank you, Monica, and good afternoon. Welcome to our earnings conference call. This afternoon, Cathay General Bancorp reported net income of $28.8 million for the first quarter 2013 or $0.30 per common share. That compared to a net income of $28.9 million or $0.32 per common share for the first quarter of 2012 and $28.3 million or $0.31 per common share for the fourth quarter of 2012.

In the first quarter, we saw an overall decrease in loans of $65 million or 1% compared to a decrease during the first quarter of 2012 of $151 million or 2%. Commercial loans decreased by $86 million, residential loans increased by $37 million and commercial mortgages decreased by $18 million. The decrease in C&I loans was mostly due to seasonality and the repayment in January 2013 of several loans originated in December ’12 as well as $21 million decrease in C&I loans in our Hong Kong office. In the first quarter of 2012, our C&I loans decreased by $23 million, for the full-year of 2012, increase in C&I loans was $259 million. Based on our internal forecast, we still expect full year of loan growth of 5% to 6% about the same as last year.

For the first quarter of 2013, our total deposits increased $42.4 million or 0.6% from $7.4 billion at December 31, 2012. Core deposits increased 4% annualized during the first quarter. During the first quarter, we signed agreement for two new branches and expect to sign another lease for the third one in the second quarter.

Net charge-off for the first quarter of 2013 was $2.7 million compared to net charge-off of $8.1 million the same quarter a year ago. Our loan loss provision was zero for the first quarter of 2013 compared to a credit of $4 million in the first quarter of 2012. Our non-accrual loans decreased 3% or $3.6 million during the first quarter to $100.3 million or 1.4% of period-end loans.

On March 20, 2013, we redeemed $129 million or 50% of Bancorp’s preferred stock issued under the U.S. Treasury’s TARP Capital Purchase plan. On April 5th of this year, the Federal Reserve Bank terminated its MOU on the Bancorp.

With that, I will turn the floor over to our Executive Vice President and CFO, Heng Chen, to discuss the first quarter’s 2013 financials in more detail. Heng?

Heng Chen

Thank you, Dunson and good afternoon everyone. For the first quarter we announced net income of $28.8 million or $0.30 per share. Included in first quarter results were $5.6 million in prepayment penalties as well as $6.3 million in security gains. The repayment – the prepayment of TARP resulted in after-tax charge of $1.3 million for the remaining unamortized discount related to the TARP stock redeem. Our net interest margin was 3.35% in the first quarter of 2013 compared to 3.28% in the fourth quarter of 2012, and compared to 3.33% for the first quarter of 2012.

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